Lexington Kentucky Real Estate

In the USA Today newspaper, there was an article that discussed the various recent changes in the mortgage industry - particularly as it relates to those that are self employed.

Many self employed persons are finding it very difficult to get real estate loans. It tells of one story of David Brannan. A successful entrepreneur that is a co founder of a software company that has been in business since 1989. He & his wife have owned their current home for 18 years, and purchasing a custom built one.

He has an excellent credit score.

A week ago, CitiMortgage had told him that everything was in good shape on his deal.

Then he received a letter that his application for a real estate mortgage had been rejected - and as if that weren’t enough, it suggested that “he consider credit counseling”.

Upon calling the mortgage company, they informed him that they had changed policy and were no longer going to consider his profit distributions from his company that he has been receiving for years. This lowered his income by more than half - and that made him unable to qualify for his real estate loan.

This is becoming more of a “normal” occurrence in the mortgage industry. People that should qualify, but don’t because of unduly restrictions being place on them. Its somewhat absurd that because of bad loans that lenders made to the subprime market with offering people 100% financing with no money down - and then got bit in the rear on it, are now punishing people that are likely to repay their loans.

Using the logic of “you are a business owner, therefore we won’t accept PROFIT as part of your income” - makes about as much sense as saying to everyone else “you work 8 hours a day at your job, therefore you have 16 hours free time since there are 24 hours in a day - and we are going to reduce your stated income for your loan application by two-thirds because 16 hours / 24 hours = 2/3″. Its completely unjustified, unfair, and NOT a realistic representation of reality.

Perception is reality is an old saying. People think they are being “smart and cautious” by creating artificial criteria that make is so cumbersome that its impossible for most persons to meet that criteria in the first place.

If a self employed person is able to show a good credit history, and a stable income - they should qualify for an appropriate loan.

Hopefully, the mortgage industry will shake off their jitters and see how they are throwing the baby out with the bath water and get rid of the deadbeats, but take care of the people that are likely to repay their debts.